States’ above-inflation budget increase ‘concerning’ says IoD
AN OVERALL increase of 8% in States committee spending for 2023 has been described as ‘concerning’ by the Institute of Directors’ lead on economics locally.
States expenditure is expected to climb to £573m. next year, an increase of £46m. on the year before.
‘The fiscal deficit after capital expenditure is unsustainable, as limited reserves are exhausted, and will contribute to local inflation when it is already elevated,’ said Richard Hemans. He pointed out that the increase in department spending exceeded inflation and the forecast 6% increase in tax receipts, making the deficit worse.
All of the seven main committees, except for Education, Sport & Culture, are set to receive increases in their budgets.
Mr Hemans said IoD welcomed the housing incentives put forward in the Budget, but believed that more could be done.
‘While the cost of living measures are probably more limited in scale than expected or required, at least compared with the UK and Jersey, we are generally pleased with the housing incentives that will help to increase the capacity of the existing housing market and discourage speculation. But considerations must be made about the impact on the local housing market,’ he said.
‘The use of the tax system to influence the housing market is powerful and could be used more widely, for example to encourage investment in skills and infrastructure, business creation and labour market participation. This could also be extended to encourage decarbonisation, net-zero goals and a greener Guernsey.’
The States Budget for next year outlines significant financial pressures being faced by the island, due to inflation, demand for public services and Guernsey’s ageing population.
‘It is clear that difficult long-term choices need to be made to bring public finances back into balance. The discussion should not be limited to increasing taxation through such measures as GST and corporate levies, but must continue to consider the provision of services, efficient procurement, capital prioritisation, borrowing and the sale of assets,’ said Mr Hemans.
‘A stable, certain, balanced fiscal position is essential to maintain Guernsey’s attractiveness as a place to invest, live, set up a business and support a strong economy with low inflation and full employment. The political and economic turmoil suffered by the UK over the past week illustrates this perfectly.’
